This country-specific Q&A provides an overview of Merger Control laws and regulations applicable in Mexico.
Mexican competition law was enacted in 1993 and significantly amended in 2014. Since then, the Mexican Competition Commission (Comisión Federal de Competencia Económica) and the Federal Telecommunications Institute (Instituto Federal de Telecomunicaciones), were created as autonomous governmental agencies with broader authorities and full independence to enforce the corresponding competition laws. The Federal Telecommunications Institute is responsible for enforcing the law within the telecommunications and broadcasting sectors. For the purposes of this document, references to either the Commission or the Institute are indistinctly referred as the authority or the agency.
Is notification compulsory or voluntary?
The authority should be notified of transactions that surpass the thresholds listed in question 6 below so it can clear them. However, operations that do not trigger the obligation to obtain a merger control clearance, can be voluntary notified. This is recommendable if the transaction could have an anticompetitive effect in the relevant market.
Is there a prohibition on completion or closing prior to clearance by the relevant authority? Are there possibilities for derogation or carve out?
Completion, or closing prior to clearance, is prohibited. The Mexican competition legal framework requires that all transactions (both mandatory and voluntary) be notified, completed, or closed upon the clearance being granted. The law also requires concentrations derived from overseas transactions to be notified (and cleared) before they can take effect within Mexico.
What types of transaction are notifiable or reviewable and what is the test for control?
Mexican law defines transactions as concentrations, which by definition are mergers, acquisitions of control, or acts in which companies, associations, capital stock, partnership interests, trusts or assets in general are consolidated, regardless of whether the participants are competitors, suppliers, customers, or any other entity or individual. Also, the Mexican law does not contain a definition of control. Nevertheless, the Mexican Supreme Court has determined that an entity or individual can exercise decisive influence or control over others, either as a consequence of legal or de facto cases, and also provides an orientation for each of the cases.
In which circumstances is an acquisition of a minority interest notifiable or reviewable
If an acquisition of a minority interest exceeds any of the thresholds listed in question 6, the transaction needs to be cleared. Nonetheless, sometimes it is possible to avoid having to obtain clearance for a transaction (for instance, in corporate restructures), and sometimes a fast-track procedure may apply (please see question 21).
What are the jurisdictional thresholds (turnover, assets, market share and/or local presence)? Are there different thresholds that apply to particular sectors?
As a general rule, concentrations need to be filed with the authority for clearance or approval if they surpass any of the following thresholds:
6.1. Transactions in which the originating act or sequence of acts, notwithstanding the place of closing, are directly or indirectly valued within Mexican territory at more than the equivalent of $80’658,000.00 US Dollars (18 million times the Measurement and Actualization Unit (MAU) of MX$89.62 pesos, using an exchange rate of MX$20 Pesos per US Dollar); or
6.2. Concentrations in which the originating act, or sequence of acts, involves the accumulation of 35% or more of an entity’s assets or capital stock, whose annual sales or assets originated from or are located in Mexico, are worth over the equivalent of $80’658,000.00 US Dollars (18 million times the MAU of MX$89.62 pesos, using an exchange rate of MX$20 Pesos per US Dollar); or
6.3. If the originating act, or sequence of acts, involves an accumulation of assets or capital stock in excess of the equivalent to $37’640,400.00 US Dollars (8.4 million times the MAU of MX$89.62 Pesos, using an exchange rate of MX$20 Pesos per US Dollar) within Mexican territory, and two or more of the entities participating in the concentration have annual sales or assets that originated in, or are located in Mexico, which are jointly or separately worth over $215’088,000.00 US Dollars (48 million times the MAU of MX$89.62 pesos, using an exchange rate of MX$20 Pesos per US Dollar).
How are turnover, assets and/or market shares valued or determined for the purposes of jurisdictional thresholds?
The agency considers entities’ net turnover as stated in their financial statements. Entities must use the higher of either of the following two sources to determine their asset value: (i) the value shown on the balance sheet; or (ii) the commercial value (provided the amount to be paid in the transaction can be considered the commercial value).
Is there a particular exchange rate required to be used to convert turnover and asset values?
The applicable currency is Mexican pesos. The legal competition framework states that transactions in other currencies should be converted to Mexican pesos for purposes of the thresholds. If a transaction is in US Dollars, the applicable exchange rate should be that published by the Central Bank of Mexico, considering the lowest rate during the five days prior to the merger control notice.
In which circumstances are joint ventures notifiable or reviewable (both new joint ventures and acquisitions of joint control over an existing business)?
Joint ventures are generally considered concentrations and therefore if they exceed the thresholds, clearance should be obtained. Also, the Guidelines for the Notification of Concentrations recently updated by the Mexican Competition Commission (Guidelines), state that joint ventures can be considered concentrations if two or more parties agree to perform joint activities, either on a contractual basis or through a legal vehicle, in which both parties make contributions (participating in profits and losses).
Are there any circumstances in which different stages of the same, overall transaction are separately notifiable or reviewable?
In multi-stage transactions, it is mandatory to file the concentration before the last of the stages surpasses the thresholds listed in question 6. Multi-stage transactions may sometimes need to obtain clearance for one or more stages if they exceed the thresholds and no exceptions or fast-track procedures apply.
How do the thresholds apply to “foreign-to-foreign” mergers and transactions involving a target /joint venture with no nexus to the jurisdiction?
The thresholds applicable in Mexico do not vary regardless of the nature of a merger. Also, if the transaction has effects in Mexico it is subject to the competition law.
For voluntary filing regimes (only), are there any factors not related to competition that might influence the decision as to whether or not notify?
Mexico has a mandatory filing regime.
What is the substantive test applied by the relevant authority to assess whether or not to clear the merger, or to clear it subject to remedies? Are there different tests that apply to particular sectors?
As part of its analysis of the concentration, the authority reviews the substantial power in the relevant market, and whether or not the concentration is lawful. The following aspects are considered to determine the relevant market: (i) the possibilities of substituting the good or service in question; (ii) the good’s distribution costs, its relevant inputs, its complementary goods and substitutes from other regions or abroad; (iii) the costs and probabilities that users or consumers have to access other markets; (iv) the federal, local or international regulatory restrictions that limit the users’ or consumers’ access to alternative supply sources, or the access of suppliers to alternative clients; among others.
To determine substantial power in the relevant market, the following elements of the participants must be considered: (i) their market share and ability to unilaterally fix prices or restrict supply in the relevant market, without competitors actually (or potentially) being able to counterbalance such power; (ii) the existence of barriers to entry and the factors which could foreseeably alter either said barriers, or the supply of other competitors; (iii) competitors’ existence and power; (iv) the entities and their competitors’ possibilities to access input sources; and (v) the recent behavior of the entities that participate in said market.
Also, to assess whether a concentration should not be authorized, the following factors shall be considered: (i) the relevant market, in the terms established in the competition law; (ii) identifying the main players that supply the market in question, an analysis of their power in the relevant market and the degree of concentration in said market; (iii) the effects of the concentration on the relevant market with regards to other competitors or consumers of the good or service, and regarding other related markets and entities; (iv) the equity participation of the involved parties in other entities, and the equity participation of other entities in the parties involved in the concentration, provided these economic agents engage, directly or indirectly, in the relevant market or its related markets; and (v) the information provided by the entities to demonstrate greater market efficiency as a result of the concentration and which will favorably impact the process of competition and free market access.
The authority shall consider the following as indicators of an unlawful concentration: (i) if it confers, or may confer, substantial market power to the purchaser in terms of the competition law, or if it increases, or could increase, said substantial market power, by which free market access and economic competition may be hindered, diminished, harmed or impeded; (ii) if it has or may have the purpose or effect of imposing barriers to entry, impeding third parties access to the relevant market, to related markets or to essential facilities or of displacing other entities; or (iii) if its purpose or effect is to substantially facilitate the concentrating parties to incur in practices prohibited under the competition law and, particularly, in monopolistic practices.
Are factors unrelated to competition relevant?
In general terms, only factors related to competition are relevant.
Are ancillary restraints covered by the authority’s clearance decision?
Ancillary restraints such as non-compete clauses are reviewed by the authority, the Guidelines analyze state requirements that must be followed in order to obtain an approval. For instance, a term of 3 years is normally approved, if duly supported.
For mandatory filing regimes, is there a statutory deadline for notification of the transaction?
The transaction should be filed before it takes effect, otherwise, the fine stipulated in question 32 will apply.
What is the earliest time or stage in the transaction at which a notification can be made?
It is possible to file a concentration notice having an executed agreement (subject to conditions precedent) or a definitive draft of agreement. Also, letters of Intent, and memorandums of understanding are acceptable documents for filing the merger control notice. Nevertheless, the significant parts of the transaction cannot change once the clearance is granted.
Is it usual practice to engage in pre-notification discussions with the authority? If so, how long do these typically take?
The agency’s officials are open to engaging in pre-notification discussions. Each case is different, but it normally requires a meeting to discuss the details of the transaction.
What is the basic timetable for the authority’s review?
The basic timetable is as follows: (i) once the notification is filed, the agency will review the documents provided and may request the parties file any missing information within another 10 business days following receipt. This must be answered by the parties within the same period; (ii) once all the basic information has been provided, the authority may request additional information (from the parties and any third party) within 15 days following receipt, and this must also be filed within 15 business days; (iii) if all the information is duly filed, then the 60 business-day process will formally begin. In the event the agency does not resolve or clear the transaction within that period of time, it will be considered unrestricted and the concentration will be cleared.
Under what circumstances may the basic timetable be extended, reset or frozen?
The periods mentioned in sections (i) and (ii) above can be extended upon request by the parties. Also, the periods mentioned in sections (ii) and (iii) above can be extended by the agency for an additional 40 business days if it considers the complexity of the transaction merits extending the review.
Are there any circumstances in which the review timetable can be shortened?
The Competition Law has strict requirements to apply for a fast track clearance process which is applicable when the acquiring party has no participation in the relevant market, or is not an existing or potential competitor of the acquired party and, in addition, any of the following circumstances concur: (i) the transaction will be the acquiring party’s first time participating in the relevant market (the relevant market’s structure shall not be modified); (ii) prior to the transaction, the acquiring party does not hold control over the acquired entity, and as a consequence of the transaction, the former increases its relative participation in relation to the latter, without attaining more power to influence the target company; or (iii) the party acquiring capital stock has control of a company and as a consequence it increases its relative participation in the company’s capital structure.
Which party is responsible for submitting the filing?
Under competition law, the parties who directly participate in the transaction are responsible for filling it, provided the authority considers those entering the corresponding agreements to be the direct participants.
What information is required in the filing form?
In Mexico there is no specific filing form, however an online notice with at least the following information must be submitted: (i) name of the entities directly or indirectly involved; (ii) name of the legal and common representative; (iii) description of the transaction (with the non-compete clauses if these exist, and the reasons for their inclusion); (iv) a description of the involved entities’ capital structure (before and after the transaction); (v) participation in entities that produce or market equal, similar or substantially related goods or services to those provided by the entities participating in the concentration; (vi) market share; (vii) facilities location; (viii) goods or services produced or offered by each entity involved should be filed. The documents listed in question 24 below should be enclosed as exhibits to said written document.
Which supporting documents, if any, must be filed with the authority?
The following supporting documents are required with the notice of concentration, keeping in mind that the authority may request additional information: (i) power of attorney of the legal representative; (ii) draft of the agreement; (iii) the documents that explain the purpose and rationale of the concentration; (iv) articles of incorporation and financial statements of the entities involved; (v) payment of fees mentioned in question 25.
Is there a filing fee?
A fee of approximately $9,817.35 US Dollars applies (using an exchange rate of MX$20 Pesos per US Dollar).
Is there a public announcement that a notification has been filed?
No formal or public announcement is issued by the agency. For instance, the Mexican Competition Commission website has a public list where it is possible to see, at least partially, the parties involved in a concentration and the docket number of such concentration. Once the concentration is cleared, the Commission publishes a public version of the resolution (redacted, without all the confidential information of the parties). It is also possible to request the agency that the identity of the parties be confidential.
Does the authority seek or invite the views of third parties?
The agency seeks (in particular for complex cases) and is allowed to request information and documents from third parties of any type (either private or public entities); provided that third parties are not considered to be involved in the process and are not granted access to the file.
What information may be published by the authority or made available to third parties?
A public version of the clearance or resolution is published. Third parties are not allowed to review or access the file.
Does the authority cooperate with antitrust authorities in other jurisdictions?
The authority cooperates and communicates with peers in other jurisdictions as several cooperation agreements have been executed. Confidential information is kept as such, unless the parties waive confidentiality to allow it to exchange information with other authorities in other jurisdictions.
What kind of remedies are acceptable to the authority?
Behavioral and structural remedies are acceptable. Parties are allowed to propose remedies they consider appropriate such as specific acts, divestitures, amending the terms of the transaction, activities to foster competition, among others. Despite parties being allowed to propose the remedies they consider appropriate, the authority has the final word.
What procedure applies in the event that remedies are required in order to secure clearance?
If the agency considers the concentration has potential risks to competition in the relevant market, it will inform the involved parties before the resolution takes place, so they can provide additional documents or information to support the transaction and avoid it being rejected or conditioned. Also, during the process, the participants can voluntarily file as much information as they consider necessary to support the operation. The agency’s resolution can resolve to reject, impose remedies, or clear the transaction.
What are the penalties for failure to notify, late notification and breaches of a prohibition on closing?
The penalty for failing to notify a concentration or late notification is of up to 5% of the entity’s income. As notified concentrations can only take effect once the clearance has been granted, no prohibition on closing is applicable.
What are the penalties for incomplete or misleading information in the notification or in response to the authority’s questions?
Competition Law stipulates a penalty of up to $784,175 US Dollars (using an exchange rate of MX$20 Pesos per US Dollar), for false statements or information, aside from possible criminal sanctions.
Can the authority’s decision be appealed to a court?
A decision can be appealed in the Antitrust Specialized Courts, however, only the final resolution can be challenged, not intra-process acts or decisions of the agency during the clearance procedure.
What are the recent trends in the approach of the relevant authority to enforcement, procedure and substantive assessment
The authority has been enforcing Competition Law severely and it has been playing a significant role in Mexican markets. Severe fines have been imposed and remedies have been implemented in different transactions. During the COVID-19 outbreak, the Mexican Competition Commission did not suspend merger control procedure since the filings are submitted online.
At the beginning of the year, the Commission issued its revised Guidelines in which they established new interpretation of the filing thresholds in cases of multiple purchasers or in a succession of acts. Also, the Guidelines finally list a series of collaboration agreements and some requirements to consider a joint venture as a concentration.
Are there any future developments or planned reforms of the merger control regime in your jurisdiction?
We do not foresee immediate developments or planned reforms of the merger control regime.
Privacy & Cookies Policy